This paper examines the drivers behind revenues of merchant electricity interconnectors and the effect of arbitrage trading over interconnectors on the level and volatility of electricity prices in the connected markets. It sets out a simulation methodology that allows the stochastic and...

This paper considers information criteria as model evaluation tools for nonlinear threshold models. Results concerning the consistency of information criteria in selecting the lag order of linear autoregressive models are extended to nonlinear autoregressive threshold models. Extensive Monte...

High crude oil prices, uncertainties about the consequences of climate change and the eventual decline of conventional oil production raise the issue of alternative fuels, such as non-conventional oil and biofuels. This paper describes a simple probabilistic model of the costs of...

High fossil fuel prices have rekindled interest in nuclear power. This paper identifies specific nuclear characteristics making it unattractive to merchant generators in liberalised electricity markets, and argues that non-fossil fuel technologies have an overlooked ‘option value’ given fuel...

A computational technique that transform integrals over RK, or some of its subsets, into the hypercube [0, 1]K can be exploited in order to solve integrals via Monte Carlo integration without the need to simulate from the original distribution; all that is needed is to simulate iid uniform [0,...

This study assesses the accuracy of the value-at-risk estimate (VaR). On the basis of posterior distributions of the unknown population parameters, we develop a confidence interval for VaR that reflects the genuine information available about the portfolios for which the VaR is calculated. This...

A new class of model-based filters for extracting trends and cycles in economic time series is presented. These low pass and band pass filters are derived in a mutually consistent manner as the joint solution to a signal extraction problem in an unobserved components model. The resulting trends...

This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and...

A transformed likelihood approach is suggested to estimate fixed effects dynamic panel data models. Conditions on the data generating process of the exogenous variables are given to get around the issue of ?incidental parameters?. The maximum likelihood (MLE) and minimum distance estimator (MDE)...

This paper extends the cross sectionally augmented panel unit root test proposed by Pesaran (2007) to the case of a multifactor error structure. The basic idea is to exploit information regarding the unobserved factors that are shared by other time series in addition to the variable under...